Wednesday, September 16, 2009

Which is More Difficult: A Marriage or a Corporate Acquisition?

My nephew recently attended a wedding and later commented that the bride and groom were totally incompatible and that he expected that the marriage would soon dissolve. His comments don’t seem entirely unwarranted. Given that half of the marriages in the US end in divorce, if you attend two weddings you can expect that one of them will not last.

Corporate acquisitions are about as likely as a marriage to be successful. With that in mind, it is interesting to look at the two acquisitions that were announced earlier this week and speculate as to whether or not they will be successful. One of those acquisitions, Avaya’s acquisition of Nortel’s Enterprise Solutions Business unit, was long expected. Avaya spent nine hundred million dollars for Nortel and set aside another fifteen million dollars for employee retention. Avaya is owned by private equity firm Silver Lake. Silver Lake executive Charlie Giancarlo, ex-of Cisco, is responsible for Avaya. While it is difficult to know what Giancarlo and Kevin Kennedy, CEO of Avaya have in mind, it is possible to make some intelligent guesses. Giancarlo knows the LAN switching business intimately. He could be interested in resurrecting Nortel’s LAN switching product line and trying to take market share away from Cisco. However, I doubt that is what he has in mind. This acquisition looks to me like Avaya is buying the Nortel customer base and if that is the case, Avaya will not face the tough challenge of product integration. Avaya will try to find a way to get at least some value out of the Nortel product set that it acquired while they focus primarily on the task of migrating the Nortel customer base over to Avaya. Given that Avaya has a seasoned management team, it is likely that Avaya will transition most of the Nortel customers and end up getting a good return on their investment. As such, this marriage (make that this acquisition) should be successful.

The CA acquisition of NetQoS came together relatively quickly. CA paid two hundred million dollars for NetQoS – roughly four to five times earnings. In 2009 that is a big multiple and indicates that CA clearly values NetQoS. There is reason to hope that this marriage can work. CA is a very different company than it was just a few years ago when it was known as Computer Associates. The CA infrastructure management group has brought in some very skilled executives (i.e., Roger Pilc, Bill Ahlstrom) and CA has made some key acquisitions; i.e., Wiley. When the new CA acquires a company, it tends to give it a fair degree of autonomy – at least for a while. That being said, Pilc will definitely want to integrate NetQoS products into the rest of his portfolio. That process always tends to take some of the momentum away from the acquired company. Perhaps the strongest threat to this marriage is that CA looses too many key NetQoS personnel if it makes the mistake of forcing a big company culture down the throats of a fast-moving small company.  Still, this marriage should work out.

40 comments:

  1. 過去的事早已消失,未來的更是渺不可知,只有現在是真實的。........................................

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  2. 人要先學會做一隻駱駝,然後才能做一隻獅子........................................

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  3. 金銀愈加磨鍊,愈加光亮,人生愈加考驗,生命愈加光輝。 ............................................................

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  4. 一定要保持最佳狀況呦,加油!!!期待你發表的新文章!.................................................................

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  5. 一個人的價值,應該看他貢獻了什麼,而不是他取得了什麼............................................................

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  6. 馬丁路德:「即使知道明天世界即將毀滅,我仍願在今天種下一棵小樹。」............................................................

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  7. 我們必須先有哭泣,才有歡笑;也必須先感到人生的悲哀,然後才感到人生的快樂。............................................................

    ReplyDelete
  8. 你要保守你的心,勝過保守一切,因為一生的果效是由心發出................................................

    ReplyDelete